This study contributes to the valuation of employee stock options (ESO) in two ways: First, a new pricing model is presented, admitting a major part of calculations to be solved in closed form. Designed with a focus on good replication of empirics, the model fits with publicly observable...

This paper examines the reliability of option fair value estimates in the presence of transaction costs. The Black Scholes Merton (BSM) framework assumes zero transaction costs and thus might not provide a reasonable approximation in this context. We investigate the model adjustments companies...

This paper examines the role of certain fair value accounting (FVA) outcomes in compensation of US bank CEOs. The use of FVA in compensation invites an agency cost - the clawback problem - if cash compensation is based on unrealized profits that may reverse in the future. At the same time FVA...

LaFond and Watts (2008) provide evidence that information asymmetry might be a determinant of accounting conservatism. One implication of their paper is that regulators trying to reduce information asymmetry by lowering the level of accounting conservatism might be wrong. However, there is a...

We test for changes in investment efficiency around a shock to financial reporting quality—the adoption of SFAS No. 123R, which requires that employee stock option (ESO) costs be recognized rather than disclosed at fair value. We predict and find a reduction in underinvestment for firms...

We study whether mandatory adoption of International Financial Reporting Standards (IFRS) is associated with changes in the sensitivity of CEO turnover to accounting earnings and how the impact of IFRS adoption varies with country-level institutions and firm-level incentives. We find that CEO...

We examine how China's adoption of a new set of Chinese Accounting Standards (CAS) that is substantially converged with the IFRS affects the managerial pay-for-accounting performance sensitivity of publicly listed Chinese firms. We find that central-government-controlled firms adopted an...

This study investigates how the mandatory adoption of International Financial Reporting Standards (IFRS) affects the contractual benefits of using accounting information to determine executive compensation in China. After controlling for firm and corporate governance characteristics, we find...

We examine how the mandatory adoption of IFRS in Continental Europe affects the contractual usefulness of accounting information in executive compensation, as reflected in pay-performance sensitivity (PPS) and relative performance evaluation (RPE). The empirical evidence indicates a weak...

The article examines the impact of the reclassification of IAS 39 on income smoothing using loan loss provisions among European banks. The author predicts that the strict recognition and re-classification requirements of IAS 139 reduced banks' ability to smooth income using bank securities and...